Our clients share their views on Budget 2012
- 21 Mar
At The Marketing Eye, we always enjoy gathering our clients' reactions to the Budget when it is announced. With a broad range of clients to call upon, our clients' views represent a true cross-section of the South East economy. While it seemed that most of the measures within the Budget had already been ‘leaked’, there were several announcements that got them talking.
As expected, and highlighted by Kieron Robertson from Valiant Financial Consultants, the personal allowance was increased (to £9,205) and, at the same time, the ‘cliff edge’ was removed for those in receipt of child benefit, meaning it will now be reduced by 1% for every £100 over £50,000 earned.
Paul Feist from Feist Hedgethorne said that the widely predicted cut in the highest rate of income tax from 50p to 45p from next year supports a commonly held view by business owners that this incentive is needed to encourage them to grow and re-invest.
Among surprises was the Chancellor’s reduction in the main rate of corporation tax to 24% from this April, with further planned reductions to 22% over the next two years.
In an increasingly complicated world it was, it seemed, a Budget which set out to make things simpler – including a single pension payment, which will go some way to alleviate the confusion that can be caused by the current system, and simplified tax rules for the smallest businesses.
“The Budget appears to have taken action to cut some of the burden of red tape for businesses. There are also incentives to get the young into work and help for small businesses to access finance,” said Liz McNaughton from Ecce Media.
There has been much talk in the press recently about raising the pension age and it came up again in the Budget.
According to Toby Rollestone from MacConvilles: “The Government’s view on raising the pension age is naïve. It fails to consider the health of persons beyond the current retirement age and is based only on economics. Will a 67 year old be as physically capable as a 40 year old and, if not, what will employers do? Will we be faced with an increase in employers claiming staff are no longer physically capable of fulfilling their contracts?”
He adds: “We need to look at what is a reasonable sum to retire on and work back from that. If the investment required to arrive at the pension sum is not affordable by the majority, then the government should seek ways to encourage investment companies to improve the returns to achieve this. This move is the easy route for the Government and not the best route for the majority.”
Pam Loch from Loch Associates Employment Lawyers was also looking at the Budget from an employer’s perspective.
“This year’s Budget reinforces and reiterates to some extent measures that the Government put in place last year to achieve growth through education and a more flexible workforce,” she explained. “The Government remains focused on continuing the review of employment law to help achieve this goal. The announcement that it will provide a response to the consultation on the introduction of fees for Employee Tribunal claims before the Summer Recess will be welcomed by employers, although the actual implementation of fees is the key to improving the current situation.”
She added: “To further reduce the burden on businesses the Government has announced that it will also ‘scrap or improve’ over 84% of health and safety regulation. This should have a positive impact on many businesses, particularly the decision to remove strict liability.
Many of Kieron Robertson’s clients are thinking about retirement and the increasing likelihood of long-term care.
“The proposed removal of age related allowances may simplify things for the elderly who currently complete tax returns,” he says. “However, while the Chancellor stated that ‘no pensioner will lose out in cash terms’, it would appear that they will lose out in real terms.”
Neil Edwards was disappointed to discover there was very little in the Budget for ‘established small businesses' like The Marketing Eye - businesses that are the so called engine room of the economy.
He continued: “We don’t export, we don't have research and development programmes and we don’t operate in an enterprise zone, so the reliefs available for these activities pass us by. We are still, however, hit by rising fuel costs and the general price of being in business.”
Liz McNaughton said that, as a director of two businesses, one of which has a heavy reliance on fuel, she was disappointed not to see a reduction in fuel duty.
“This will still hit small businesses hard and a solution needs to be sought in the long term to reduce fuel prices at the pump,” she said.
Neil Edwards added that while the extension of the National Loan Guarantee Scheme was announced with a fanfare, it is access to credit and not the cost of credit that is the issue for most small businesses.
Liz McNaughton is positive about some of the benefits for business highlighted in the Budget. She explained: “With many businesses still finding it difficult to access funding through the banks, the £1.1 billion available through the Business Finance Partnership will be welcomed by many.”
She added: “The Government needs to support and encourage young people into business and cultivate the entrepreneurial spirit. The Enterprise Loans for young people looking to start their own business is a fabulous initiative. We also welcomed news about the 10 super connected cities in the UK, but we need to ensure that rural areas are not left behind.”
Richard Holme from Creaseys said that the reduction in top rate Income Tax to 45% from April 6 2013 should boost business and clearly, wherever possible, income should be deferred until after that date – businesses may choose to pay dividends and bonuses to owner managers after that date.
“Generally, the use of companies to conduct business and indeed the payment of dividends as a form of remuneration from corporate entities becomes even more attractive following the changes,” he added.
Paul Feist from Feist Hedgethorne said that lower and middle income earners benefitted from significant increases in the amount which every person can earn before paying tax so that for 2012/13, the personal allowance rises to £8,105 and the year after to £9,205.
He added: “The Chancellor told the jubilant Coalition benches that he was well on track to reach his goal of a £10,000 tax free allowance for every person in the UK by the end of this parliament.”
When it comes to the UK property market, Richard Holme from Creaseys said: “It remains to be seen what effect the very large increase in Stamp Duty Land Tax for expensive properties will bring. Another inhibiting factor on investment may be the crackdown on offshore entities making tax free gains on disposing of UK residential property. These entities will need to restructure prior to the change in April 2013. Thankfully, there are no changes to Capital Gains Tax and every effort must be made with business and property interests to obtain a 10% tax rate on exit.”
So, to conclude – here’s how some of our clients summed up the Budget:
“Another balancing act of a Budget, leaving us no better or worse off over the next five years.”
Kieron Robertson, Valiant Financial Consultants
“We weren’t expecting a giveaway budget and we didn't get one. The overall strategy to reduce the deficit and keep interest rates low appears sound, so it seems we all have to keep our shoulders to the wheel for a good time yet.”
Neil Edwards, The Marketing Eye
“All in all, although not significantly exciting, there are some important changes ahead for employers.”
Pam Loch, Loch Associates
“Very much not a ‘do nothing’ Budget for the UK economy and plenty of opportunity to plan carefully to minimise tax liabilities.”
Richard Holme, Creaseys
“The Government needs to get the economy back on track and continue to tackle the Budget deficit. We were never going to be given any gifts this year, this is really a fiscally neutral budget for business.”
Liz McNaughton, Ecce Media